Baxter’s second quarter results were met with a significant negative market reaction following a combination of in-line sales and a notable shortfall in non-GAAP profit. Management attributed the mixed performance primarily to persistent hospital fluid conservation, modest demand in the Medical Products & Therapies and Pharmaceutical segments, and challenges related to product mix. COO Heather Knight highlighted the ongoing effects of lower U.S. patient admissions and evolving hospital protocols as key factors, while also acknowledging a temporary pause in shipments of the Novum IQ infusion pump due to quality feedback. Management’s cautious commentary around operational softness and product-specific disruptions shaped the tone of the quarter.
Is now the time to buy BAX? Find out in our full research report (it’s free).
Baxter (BAX) Q2 CY2025 Highlights:
- Revenue: $2.81 billion vs analyst estimates of $2.82 billion (4.3% year-on-year growth, in line)
- Adjusted EPS: $0.54 vs analyst expectations of $0.61 (11.4% miss)
- Adjusted EBITDA: $680 million vs analyst estimates of $573.8 million (24.2% margin, 18.5% beat)
- Revenue Guidance for Q3 CY2025 is $2.87 billion at the midpoint, below analyst estimates of $2.90 billion
- Management lowered its full-year Adjusted EPS guidance to $2.47 at the midpoint, a 1.6% decrease
- Operating Margin: 6.8%, in line with the same quarter last year
- Constant Currency Revenue rose 4% year on year (5% in the same quarter last year)
- Market Capitalization: $12.32 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Baxter’s Q2 Earnings Call
- Robert Justin Marcus (JPMorgan) pressed for detail on Novum IQ’s impact and guidance assumptions. COO Heather Knight clarified the pause had no Q2 impact but that guidance assumes no additional shipments for the year, while CFO Joel Grade said this captures the downside risk.
- David Harrison Roman (Goldman Sachs) asked about business trends through the quarter and guidance conservatism. Knight explained Q2 played out as expected in IV solutions, with injectables softness a surprise, and Grade emphasized a prudent, level-loaded approach for the second half.
- Travis Lee Steed (BofA Securities) questioned the composition of the revenue guide reduction by product and the spectrum of assumptions for Spectrum and IV solutions. Grade declined to break out specifics but reiterated that guidance assumes little recovery in hospital fluid usage.
- Vijay Muniyappa Kumar (Evercore ISI) inquired about the severity and timeline of Novum IQ issues. Knight maintained the pause is voluntary and targeted, not reflective of a long-term or severe recall, and that plans are to resume shipments as soon as feasible.
- Lawrence H. Biegelsen (Wells Fargo) asked about gross margin outlook and new CEO Andrew Hider’s qualifications. Grade recommended focusing on operating margin due to reclassification noise, while Chair Brent Shafer cited Hider’s operational experience as well-suited for Baxter’s complexity.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the status and timing of Novum IQ infusion pump shipment resumption and related customer feedback, (2) whether hospitals begin to lift IV fluid conservation practices and return to historical usage patterns, and (3) progress on reducing stranded costs and executing operational improvements under new CEO Andrew Hider. The pace of international segment growth and any recovery in pharmaceuticals will also be key markers of execution.
Baxter currently trades at $24.14, down from $28.07 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
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